Short Term vs Long Term Rentals – A New Kind of Positive Cash Flow

https://www.youtube.com/watch?v=SL8UOSLI6Ho

In the past it used to be that short-term rentals were for people who own vacation homes and wanted to make a little bit of extra money from owning them.

But now with the introduction and the growth of places like Airbnb there's potential that you could make more rental income per year renting your property out short term then you could renting your property out to a long-term tenant.

Today's episode is made in partnership with Made Comfy who offer professional Airbnb management services.

A Growing Trend

I've had a lot of people in my life starting to do this, I've got friends who are now renting out their properties through Airbnb. I know people who rent out extra rooms through Airbnb.

I've got friends of my dads who live in Sydney and they purchased a property in Tasmania that was a dual income property. They're renting out both sides of the property through Airbnb and using a property manager and I think they were getting upwards of around 13% rental yield for that property.

It has been so successful they were considering selling their Sydney property and buying a couple more properties in Tasmania to replicate the same strategy and become financially free.

Short-term rentals may be a new way to make a property positive cash flow

In this article I want to explore some of the pros and cons and considerations that you need to have if you're considering a short-term rental for your property.

Do Short Terms Rentals Make More Money Than Long Term Rentals?

The first thing we need to consider is the money and whether or not you can actually make more money through short-term rentals than long.

I feel like if you can't make more money then it's going to be a lot more hassle for less money and that doesn't seem worth it.

If we have a look at the average monthly returns based on a two-bedroom apartment in Darlinghurst you can see that for long-term rental you're looking at around $3,500 per month. Self-managed Airbnb a bit higher and then using a professional property management service like Made Comfy that could even go upwards of $5,900

There clearly is the opportunity to make more money and it's not just Made Comfy that are talking about this either.

This article at The Courier Mail talking about Airbnb listings generating much more than pocket money. There's this article on Property Update talking about the Airbnb phenomenon and short term rentals then you've got this article talking about the most profitable Airbnb locations. Then we've got a forum post where people are talking about Airbnb and saying that "on average the returns are higher than a normal rental."

It definitely seems like there's potential to make more money through short term rentals.

Short Term Rental Case Studies

Let's have a look at some case studies here from Made Comfy's site

Collingwood, MEL

For the Collingwood one you can see that they actually boosted their rental income by moving to a short term rental. They get a 40% higher net return than a long-term rentals.

That word NET RETURN is actually really important because gross return is how much total income that you're bringing in and net return is actually your return after expenses.

So 40% higher net return, not just a 40% higher gross return.